IR35 - it it worth worrying about any more?

IR35 - it it worth worrying about any more?

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I read the other day that the number of IR35 enquiries opened in the last 5 years has been negligible and the yield from these enquiries equally derisory.

Therefore I would be interested to know now what steps other accountants take to assess new clients IR35 risk and what advice you give?

I also read somewhere else that taking the rules literally 20% of contractors definitely pass, 20% definitely fail and 60% are in a grey area.

So in practice when taking a new contractor on, is it sufficient to advise them of IR35, the tax implications of passing or failing, and then let them decide if they want to take the risk of being one of the unfortunate few who are caught.

I feel there is a danger here that one can be excessively cautious when advising a client here and in so doing they could end up playing things too much according to the book (which is very imprecise book anyway) and paying more tax than they probably need to?

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By Moonbeam
21st Nov 2014 12:27

I saw someone the other day who was probably at risk

I now take the view that anyone I see who I think is at risk of IR35 I won't act for.

The people that I've seen like this have set up a ltd company without any advice beforehand and are not really in business at all, having only one major client that they used to work for fulltime on PAYE and now telling me that the only difference is that they will just be billing the client from the ltd company.

If they feel they still want to continue with their ltd co I usually say I would rather not act for them in the circumstances as I feel my fees will not be welcome in conjunction with the extra NI etc. 

I realise there are other situations, but these are the ones where I never feel happy being involved.

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By Maslins
21st Nov 2014 13:00

I think reality is it's failed, HMRC know it's failed, but they're concerned that admitting that and/or scrapping it will lead to the floodgates opening for all mid-high earning employees.  Therefore they're continually beating the drum to maintain some fear...until they figure out a better solution.

Having said that, I think it'd be very dangerous as an accountant to completely disregard it.

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By anneaccountant
21st Nov 2014 16:42

It is a tricky one from a practical point of view especially when the client says he has colleagues who have set up limited companies in a similar situation and are going down the dividend route to save NI contributions.

You feel a bit of a spoil sport when you are the accountant who points out the facts and you tell your client that really they should be paying themselves a salary rather than dividends

I must confess to date I have always been cautious and recommended the technically correct route; however the woeful performance of HMRC in this area does make me wonder if overall I have done my clients any favours!

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Dave Chaplin
By Dave Chaplin
21st Nov 2014 18:25

Just seek instruction

Hi,

Accountants don't need to spend time learning the complex employment status case law that has been formed over decades of court cases. Even judges find it hard to assess and rule on status. In the same way that employment status lawyers don't learn double entry book-keeping and become accredited accountants, accountants down need to step into the employment status zone and become lawyers.

Simply point your client to IR35, ask them to self-assess, perhaps pointing them to an IR35 expert, and then take instruction on how to deal with their accounts. If they are then investigated at a later date, point them to tax experts who can help defend their employment status decision.

Your clients can start by assessing their status using the free online IR35 status test on ContractorCalculator. For the latest on IR35, read our brand new IR35 whitepaper.

Dave Chaplin

CEO, ContractorCalculator

 

 

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By dropoutguy
21st Nov 2014 19:39

I tend not to take "false status" cases on either.  But most accountants do.  When the law is changed and we have simpler statute based tests, those accountants are going to have lots of weeding to do within their client bases.

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7om
By Tom 7000
25th Nov 2014 12:04

Uncertainty

The problem is its the uncertainty.

I tell clients somethings are certain eg your personal allowance or the rates of tax

But IR35 is an opinion and it depends who you ask. So you refer them to the guidance published by HMRC and the membership associations eg  pcg qdos etc that are set up for this and can review their contracts and then say they have to decide which area they fall into.on balance.

 

You cannot leave yourself open to be sued for bad advice so let them decide.

 

They can always take IR35 insurance as well available at all good bookstores and if it happens that HMRC think they fall inside  with the Insurance they get some nice barristers to help them  but not you so you dont have to be concerned from that angle.

 

With the pack of info we send with year end accounts you remind them...ie they need to review their status to assess if they fall into the provisions as things change from time to time.

 

If you think they are 100% IR35 and they are going against your advice...then you have to make a money laundering report.

 

 

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By stevec.cooperparry.com
25th Nov 2014 12:20

We take on many clients that are potentially affected by IR35.  We have found the following:

50% are excluded from IR35 by the nature of their work

25% are excluded after reviewing their contract/working practices

15% are excluded after changing the wording of their contract to reflect their working practices

5% are in a grey area

5% pay IR35 tax

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